Question 1

Why is the opportunity cost of gasoline in Canada higher than in the United States when measured by "Minutes Worked per Kilometre Driven"?

Accepted Answer

A)   The fuel economy in the two countries is different.
B)   Gas prices are lower and average wages are higher in the United States.
C)   Both gas prices and average wages are higher in the United States.
D)   Both gas prices and average wages are lower in the United States.E) None of the above
F) B) and D)

Question 2

What is the effect of an increase in the money supply in the economy?

Accepted Answer

A)   It increases unemployment in the short run.
B)   It increases inflation in the long run.
C)   It increases inflation in the short run.
D)   It increases unemployment in the long run.E) All of the above
F) None of the above

Question 3

Lisa buys a 1982 BMW, which she plans to restore and sell. She anticipates that the cost of the car and the repairs will be $10,000 and that she can sell it for $15,000. After she has spent $10,000, she discovers she needs to replace the engine, which will cost $4000. She can sell the car without the new engine for $11,000. What should Lisa do?

Accepted Answer

A)   She should complete the repairs for $4000 and sell the car for $15,000.
B)   She should sell the car now for $11,000.
C)   She should keep the car because selling it would be a loss.
D)   She should be totally indifferent between finishing the project and selling the car now.E) A) and B)
F) All of the above

Question 4

Scarcity means that there is less of a good or resource available than people wish to have.

Accepted Answer

A) True 
 B)False

Question 5

To what extent does the invisible hand model of a market ensure equity and efficiency?

Accepted Answer

A)   The invisible hand always ensures both equity and efficiency.
B)   The invisible hand cannot ensure either equity or efficiency.
C)   The invisible hand is more effective at ensuring efficiency than it is at ensuring equity.
D)   The invisible hand is more effective at ensuring equity than it is at ensuring efficiency.E) A) and C)
F) B) and C)

Question 6

Stan buys a 1966 Mustang, which he plans to restore and sell. He anticipates that the cost of the car and the repairs will be $15,000 and that he can sell it for $19,000. When he has spent $15,000, he discovers he needs to replace the engine, which will cost $4000. He can sell the car without the new engine for $9000. What should Stan do?

Accepted Answer

A)   He should complete the repairs and sell the car for $13,000.
B)   He should sell the car now for $9000.
C)   He should never try such an expensive project again.
D)   He should be totally indifferent between finishing the project and selling the car now.E) A) and D)
F) All of the above

Question 7

From which of the following is the word "economy" derived?

Accepted Answer

A)   environment
B)   one who manages a household
C)   one who participates in a market
D)   allocationE) B) and D)
F) B) and C)

Question 8

Trade with any nation can be mutually beneficial.

Accepted Answer

A) True 
 B)False

Question 9

In the nation of Dictatorland, farmers traditionally feed grain to their livestock. Central planners, however, decided to increase the price of grain to make grain farmers happy and to reduce the price of bread made from that grain to make city dwellers happy. Now the price of bread is lower than the price of grain. What might we now expect?

Accepted Answer

A)   farmers to continue to feed grain to their livestock
B)   farmers to start feeding bread to their livestock
C)   city dwellers to start buying grain to make bread to eat
D)   city dwellers to start buying grain to make bread to sellE) None of the above
F) A) and D)

Question 10

Which good best meets the definition of scarcity?

Accepted Answer

A)   air
B)   water in the ocean
C)   electricity in a city
D)   wood in a forestE) None of the above
F) B) and C)

Question 11

In 2014, what was the average Canadian income?

Accepted Answer

A)   $25,368
B)   $29,000
C)   $36,800
D)   $49,000E) All of the above
F) B) and C)

Question 12

What is NOT a benefit from trade?

Accepted Answer

A)   the ability to specialize
B)   a greater variety of goods and services becoming available
C)   less competition
D)   lower pricesE) A) and D)
F) A) and C)

Question 13

What is the primary determinant of a country's standard of living?

Accepted Answer

A)   the ability to reduce foreign competition
B)   the ability to produce goods and services
C)   the total supply of money in the economy
D)   the average age of the country's labour forceE) C) and D)
F) B) and D) B

Question 14

The average cost per seat on a train trip from Edmonton to Jasper is $140. Suppose no refreshments are served and three seats are empty. How could the train company increase its profit?

Accepted Answer

A)   if it charged no less than $140 for the three remaining seats
B)   if it charged more than $140 for the three remaining seats
C)   if it charged any ticket price above $0 for the remaining seats
D)   if it left the seats emptyE) A) and B)
F) None of the above C

Question 15

Which business most likely has market power?

Accepted Answer

A)   a furniture store in Kingston
B)   a vineyard in the Okanagan Valley
C)   a maple sugar candy store in Sherbrooke, Quebec
D)   a hockey arena in the small town of Invermere, British ColumbiaE) All of the above
F) B) and D)

Question 16

What is the definition of inflation?

Accepted Answer

A)   a period of rising productivity in the economy
B)   a period of rising income in the economy
C)   an increase in the overall level of output in the economy
D)   an increase in the overall level of prices in the economyE) B) and C)
F) None of the above

Question 17

Which situation best illustrates a marginal change?

Accepted Answer

A)   Nancy retires and takes a part-time job. She was working 40 hours per week, but now works 10 hours per week.
B)   Provincial University has announced that due to provincial budget deficits, tuition must rise by 25% next year.
C)   Adam moved from Edmonton to Toronto and now pays 40% more for rent than before.
D)   Banff, which usually receives 600 cm of snow per year, received 620cm last year.E) B) and C)
F) A) and D) D

Question 18

What is one advantage that market economies have over central planning?

Accepted Answer

A)   They provide an equal distribution of goods and services to consumers.
B)   They establish government economic control.
C)   They solve the problem of scarcity.
D)   They are more efficient.E) A) and D)
F) A) and C)

Question 19

Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity.

Accepted Answer

A) True 
 B)False

Question 20

What are two very likely reasons for a government to intervene in a market?

Accepted Answer

A)   to promote stability and to raise revenues
B)   to promote equity and to promote efficiency
C)   to promote equity and to promote stability
D)   to promote efficiency and to raise revenuesE) A) and B)
F) All of the above

Exam 1: Ten Principles of Economics

Why is the opportunity cost of gasoline in Canada higher than in the United States when measured by "Minutes Worked per Kilometre Driven"?

Correct Answer
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What is the effect of an increase in the money supply in the economy?

Correct Answer
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Correct Answer
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Scarcity means that there is less of a good or resource available than people wish to have.

Correct Answer
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To what extent does the invisible hand model of a market ensure equity and efficiency?

Correct Answer
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Correct Answer
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From which of the following is the word "economy" derived?

Correct Answer
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Trade with any nation can be mutually beneficial.

Correct Answer
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Correct Answer
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Which good best meets the definition of scarcity?

Correct Answer
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In 2014, what was the average Canadian income?

Correct Answer
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What is NOT a benefit from trade?

Correct Answer
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What is the primary determinant of a country's standard of living?

Correct Answer
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B

The average cost per seat on a train trip from Edmonton to Jasper is $140. Suppose no refreshments are served and three seats are empty. How could the train company increase its profit?

Correct Answer
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C

Which business most likely has market power?

Correct Answer
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What is the definition of inflation?

Correct Answer
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Which situation best illustrates a marginal change?

Correct Answer
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D

What is one advantage that market economies have over central planning?

Correct Answer
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Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity.

Correct Answer
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What are two very likely reasons for a government to intervene in a market?

Correct Answer
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Exam 1: Ten Principles of Economics

Why is the opportunity cost of gasoline in Canada higher than in the United States when measured by "Minutes Worked per Kilometre Driven"?

Correct AnswerverifiedShow Answer

What is the effect of an increase in the money supply in the economy?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Scarcity means that there is less of a good or resource available than people wish to have.

Correct AnswerverifiedShow Answer

To what extent does the invisible hand model of a market ensure equity and efficiency?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

From which of the following is the word "economy" derived?

Correct AnswerverifiedShow Answer

Trade with any nation can be mutually beneficial.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which good best meets the definition of scarcity?

Correct AnswerverifiedShow Answer

In 2014, what was the average Canadian income?

Correct AnswerverifiedShow Answer

What is NOT a benefit from trade?

Correct AnswerverifiedShow Answer

What is the primary determinant of a country's standard of living?

Correct AnswerverifiedB

The average cost per seat on a train trip from Edmonton to Jasper is $140. Suppose no refreshments are served and three seats are empty. How could the train company increase its profit?

Correct AnswerverifiedC

Which business most likely has market power?

Correct AnswerverifiedShow Answer

What is the definition of inflation?

Correct AnswerverifiedShow Answer

Which situation best illustrates a marginal change?

Correct AnswerverifiedD

What is one advantage that market economies have over central planning?

Correct AnswerverifiedShow Answer

Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity.

Correct AnswerverifiedShow Answer

What are two very likely reasons for a government to intervene in a market?

Correct AnswerverifiedShow Answer

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B

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C

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D

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